Key Benefits
Grow Your Pension – Most pension plans provide you with a monthly income, and typically those income payments are increased annually by a certain small amount so as to offset the effects of rising inflation (such as 1% to 3% annual increase). When held within a Canadian QROPS, your assets are invested so that you have the potential to grow your investments at a much better rate.
Investment Flexibility – Within a QROPS, you have much more control and flexibility over your investment selections. You will have the option of owning various baskets of professionally-managed equity and bond funds, depending on your goals and appetite for risk. You even have options to own fully guaranteed investments as well.
Ease of Administration – Many people choose to consolidate their assets all with one financial advisory team, so that their investment choices are aligned with their overall financial and lifestyle goals. If you have more than one pension, you may be able to consolidate your pensions into one account for ease of administration, while at the same time knowing that your overall investment portfolio is working together for you.
Tax-Free Spousal Rollover – If you name your spouse as the beneficiary of your QROPS, the value of the account will be transferred to them tax-free (and probate-free) upon your passing. Tax is ultimately paid on the passing of the second spouse, but then the remaining amounts can then be paid out to your children or your estate as per your wishes. Compared to a UK pension, often there would be an amount paid to the surviving spouse by way of a reduced monthly pension (i.e. a 50% survivor pension) for the remaining life of the surviving spouse. Upon that spouse’s passing, typically there is no remaining amount paid to your children or estate.
Exchange Rates – When you transfer your UK pension to a Canadian QROPS, you will get a very competitive rate on the large lump-sum transfer of British pounds to Canadian dollars. Then the monies are invested in Canadian denominated assets so that you avoid any future currency fluctuations. Compared to a monthly pension received from UK, you would be subject to the monthly fluctuations of the exchange rate. As is the case, these monthly income amounts would not receive the most competitive exchange rates simply due to their relatively small amount.